Women Can Fight the Social Security Gender Gap

Women Can Fight the Social Security Gender Gap

Why is there a gender gap in the Social Security benefits received by married women?

Research by the National Bureau of Economic Research, a private think tank that publishes research aimed at political leaders, academics and businesspeople, provides some insight into the reasons and suggests what women can do to overcome this situation.

NBER’s analysis reveals that many women marry men who are old, yet they retire at around the same age. Women often take time off to raise children, too. For this reason, they contribute less to their Social Security accounts than the average married man. If they retire early, they loose out on vital years of employment and concomitant contributions to Social Security.

Nicole Maestas, who authored the NBER report, divided married women into two groups: the “early cohort”, the first of whom turned 62 in 1998, and the “boomer cohort”, where the oldest reached 62 in 2010. In the first group, 69% married men who were older; in the latter, 63%. The average age difference was two years. Employment years and earnings increased among the boomer group when compared to the early cohort. Earnings among both groups increased at a faster rate than for men in late-career age categories.

However, women are apparently more likely to retire early than men. For example, in the boomer cohort, 47% of women left the workforce or switched to part-time employment at 62, while only 41% of men did so. Female boomer retirees enjoy higher Social Security benefits than the early cohort, but Maestas showed that by retiring early, instead of waiting until age 70, they were giving up considerable benefits. It seems that many women enjoy increased wages later in their careers, which compensates for lower payments in earlier life. This is why working longer provides many women with better returns than men enjoy.

In the end, the report concluded that women often do not consider the effects of employment choices on their Social Security benefits. Financial advisors who are aware of these findings may be better able to assist their female clients on this vital issue.

For more information, please read:
Married Women Are Making a Big Social Security Mistake | ThinkAdvisor


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